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MARCH 3, 2003 NEWS ANALYSIS Can Salesforce.com Stamp Out Software? [Page 2 of 2]
With that kind of breadth, Salesforce.com.com faces competition on all sides. In addition to Siebel and Microsoft, it runs into Oracle, SAP (SAP ), and PeopleSoft (PSFT ) in enterprises, smaller-fry such as SalesLogix in the mid-market, and fellow ASP UpShot in all three segments. Technology analysts typically recommend Salesforce.com for small businesses and as an experiment or stop-gap solution for large enterprises. But they predict that eventually, when the economy improves, many of its large customers will graduate to more function-packed traditional software products. "If budgets free up, sales managers will again focus on the broader tools that aren't available from Salesforce.com. Not everyone needs a Mercedes Maybach, but most at least want a Camry, and they don't get that from Salesforce.com," says analyst Michael Maoz of Gartner. "ANALYSTS ARE WHORES." Analysts think the Microsoft threat is this upstart's major hurdle, however. Rod Johnson of AMR Research points out that over the past three years, Salesforce.com's prices have crept up. Small companies can buy Microsoft's software for about $400 per user -- and that's a one-time expense. He says most companies still prefer to own their software. "I see a lot of risk for them from Microsoft," he says. Is Benioff worried? Hardly. He argues that his offerings have a lot more capabilities and advantages for customers than the analysts give Salesforce.com credit for. He says that since the tech market researchers get most of their revenues from large tech companies, their analysts are captive to the status quo and conventional thinking. "The analysts are whores to the established software vendors," he says defiantly, abandoning his normally affable style. Customers are pleased with Salesforce.com's service. Frank Mallozzi, vice-president for sales at printing technology specialist Electronics For Imaging, says he bought Salesforce.com for his 200 salespeople last year because it was affordable, it could be integrated with the company's run-the-business applications from SAP, and it has all the bells and whistles he requires. "Even as we grow, we believe this will give us all we need. We don't have to switch to an enterprise software package," says Mallozzi. GROWING LEGITIMACY. Now, Benioff is beefing up Salesforce.com's offerings. This year, he'll add document- and contracts-management features, and expand the billing and invoicing capabilities. He's also creating what he calls a "shell" that allows customers to get at capabilities and data in their SAP and Oracle financial and order systems via Salesforce.com -- rather than having to use the more complex software. As a sign of Salesforce.com's growing legitimacy in the enterprise market, on Feb. 28 it announced a strategic alliance with PricewaterhouseCoopers, its first such alignment with a major tech-consulting firm. PwC will train a team of Salesforce.com experts. If Salesforce.com continues to gain ground in corporations and hits its financial performance targets, it will prove that the utility-computing model can work. And that would clear the way for other startups and even established companies to make a go of it, too. Don't count this revolution out just yet.
 By Steve Hamm in New York Edited by Douglas Harbrecht Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | MARCH |
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